Technology One

About the author:

Author name:

By Nick Harris

Job title:

Senior Analyst

Date posted:

27 May 2014, 1:08 PM

Sectors Covered:

Telecommunications, Technology

The 1H14 result from Technology One (TNE) was in-line with our expectations. Timing differences created some lumpiness in the result so it's more important to focus on the full year outlook which, as expected, is for 10-15% profit growth.

Key points

• EBITDA was up 10.3% year on year to A$14.4m (vs our A$14.2m forecast)
• NPAT was up 13.6% to A$9.9m (vs our A$10.2m forecast)
• TNE declared a 2.0cps interim dividend (vs our 2.1cps forecast)

The key positive was that 1H14 was expected to be subdued as contracts were potentially pushed into 2H. However several of these fell in 1H14 making it a solid result and positioning TNE well for growth in the full year.

The key negative was that operating cashflow was weak (down 83% year on year to just A$1.9m). However this relates to the timing difference mentioned above where contracts were signed late in the half and where revenue was booked but customers had not paid TNE before the period end. TNE ended the period with A$54.0m in cash so is comfortably able to manage this.

Outlook

Technology One expect 10-15% profit growth for the full year. We are forecasting 14% growth so make no changes to our forecast.

Investment view

TNE remains a high quality company. We retain our Hold recommendation with a share price target of A$2.47.

Morgans clients can access our full report on Technology One (TNE). If you are interested in finding out more, please contact your nearest Morgans office.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.